How much can i spend and how fast ? (confused)

[beowulf18]

I could use some thoughts/wisdom from members here. I feel a bit lost as to how much to spend how fast from my savings. I am frugal by nature, that is how I accumulated a net worth of $1.2M as a teacher over 25 years. No debt. Half in tax deferred, half liquid (diversified mutual funds) in non-tax deferred. I also have a pension; my pension, along with social security when that kicks in in a decade or so, gives me about $2300/month take home after taxes (I have lived on half that up until now, saving most of my paycheck). Single, 56, non-smoker, good health, no dependents, no debt. I have about 15% of my savings in precious metals (hedge about inflation and potential collapse of the dollar).

What should I be withdrawing from my savings monthly to enjoy a bit of life, but also to stay financially secure, especially in light of potential economic collapses I hear about that could come in a decade (so the dommsayers say) because of the USA's fiscal debt and budget deficits?

[REWahoo]

Have you run your numbers through FIRECalc (link near the bottom of the page). That should give you an idea of what you can spend and not run out of money - assuming the economic future is no worse than the worst we've seen in the past.

[beowulf18]

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Originally Posted by REWahoo Have you run your numbers through FIRECalc (link near the bottom of the page). That should give you an idea of what you can spend and not run out of money - assuming the economic future is no worse than the worst we've seen in the past.

Will do. Still, I keep reading doomsayers (Peter Schiff et al) talking about an economic collapse in a decade give or take, so I question if that FIRECalc model can account for that? I do feel smart in having 15% of my savings in gold, historically a hedge against economic downfalls. House is paid for. Wow but I look the increasing cost of food when buying groceries, crazy-- I guess one could always revert to the days we were poor college students and dine a la Ramen noodles, lol!

[Midpack]

No one can predict what will work with any certainty, and no calculator can either. You could buy an annuity to provide more floor income to go with your pension & Soc Sec, but this is a historically bad time to buy an annuity (yields are at historic lows). You have to decide how aggressive (spend more with faith in future returns) or conservative (spend less with less faith in the future) you need to be. Directly from the FIRECALC site:

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How can I be sure these results will work in the future? FIRECalc's standard model uses the overall US stock market performance. Most 401k and similar retirement plans offer investment choices ("index funds") that are closely tied to the overall market performance, and the others generally tell you how they compare. If the next few decades are even worse for the stock market than the worst that has ever been seen, including the Great Depression, then all bets are off. But as one early retiree pointed out, there isn't much anyone can do to prepare for a comet hitting us! How can FIRECalc predict future returns from past performance? It can't. And it doesn't try. In fact, it tries to predict what will not happen. This might sound confusing, but it's really simple. Consider an analogy: Suppose you are building a house in Honolulu. How do you decide how much heating and air conditioning capacity you will need? We know that the lowest it has ever been there was 52°, on a day in February 1902 and again on another day in January 1969, and the hottest it has ever been was 95°, in 1994. Buying a system suitable for an Anchorage-style winter and a Phoenix-style summer would be a major waste of money that could be better used elsewhere. FIRECalc works the same way, using stock market history and your portfolio and spending plan instead of weather history and furnace capacity. No one could predict the temperature for any specific given future date during the decades that house will be used, and no one can predict the future returns of your investments. But by knowing the historical worst cases, you'll have the information to judge if your savings are sufficient to handle the winter.

[REWahoo]

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Originally Posted by beowulf18 Still, I keep reading doomsayers (Peter Schiff et al) talking about an economic collapse in a decade give or take, so I question if that FIRECalc model can account for that?

No, it doesn't account for any disaster worse than has befallen us in the past 200 years or so. No financial model can account for a total collapse of the international economy, a worldwide epidemic of Ebola virus or an asteroid strike. Nothing we can reasonably do to hedge against something of that nature - even stockpiling gold, MREs and ammunition is unlikely to save us.

You must choose your own path but I think one of conservative spending (under 4% of your nest egg) and diversified investments is the best we mere mortals can reasonably do.

Others will be along shortly to point out I'm a hopeless optimist and will be among the first to starve to death when all hell breaks loose...

[LOL!]

I'd say you can spend as much as you want because apparently you don't want to spend much. Wake up! Smell the Roses!

[beowulf18]

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Originally Posted by LOL! I'd say you can spend as much as you want because apparently you don't want to spend much. Wake up! Smell the Roses!

I am thinking 2% of my savings per year should be safe for now--- that, on top of my pension income, really more than i need, but actually probably about right given I will have to buy med/dental soon (actually I am covered on that for 2-4 years once it kicks in because of a health savings account), and given I would like to spend a few thousand a year on travel or other such entertainment. I should be safe at 2% draw for a few years, or between 2-4% as some of you suggest. That would be plenty.

Except that a dream of mine has been to build a new but small geodesic dome home, I figure that would cost me about $250,000 less the $150,000 of my current home's worth, so net $100,000; if I could do that it would be a dream home.

[REWahoo]

Quote:

Originally Posted by beowulf18 Except that a dream of mine has been to build a new but small geodesic dome home, I figure that would cost me about $250,000 less the $150,000 of my current home's worth, so net $100,000; if I could do that it would be a dream home.

A yurt is much cheaper...

[LOL!]

My dream is to build a home that is so traditional that folks leave a letter in my mailbox once a week saying, "Let us know when you are going to sell your home. We would love to buy it."

Somehow I don't think a geodesic dome would get such letters.

[Tyro]

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Originally Posted by beowulf18 Wow but I look the increasing cost of food when buying groceries, crazy--

..and that's nothing compared with the rising costs of healthcare & insurance...

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Except that a dream of mine has been to build a new but small geodesic dome home, I figure that would cost me about $250,000 less the $150,000 of my current home's worth, so net $100,000; if I could do that it would be a dream home.

I'd advise that you talk to a number of people who've actually lived in one (or tried to)...

Tyro

[NW-Bound]

If I were single, I would live in a house the size of this one, whose photo I linked off the "tinyhouseblog" site. Then, I would be able to spend more time wandering the country with my RV, then perhaps the world.